January market improves over last year

For the fourth consecutive month, housing inventory levels have recorded year-over-year declines. At 4,112 total units, January’s inventory was 18 per cent below last year’s levels.

“While housing conditions continue to favour buyers, a slow transition toward more balanced conditions is helping to ease downward pressure on home prices,” said CREB® chief economist Ann-Marie Lurie. “Conditions have improved over last year, but people need to remember that last year’s market was one of the weakest on record. Despite the appearance of a major shift in activity, the transition in the housing market is going to be a slow process.”

January sales totaled 947 units, 24 per cent above last year, but 21 per cent below 10-year averages for the month. Sales activity improved across all product types, but only when compared to the near record lows that occurred in January 2016.

The detached segment of the market is demonstrating the most improvement. Sales activity totalled 584 units in January, a considerable improvement over the 466 sales recorded last year. Inventories have also declined pushing the months of supply to 3.2 months well below the 5.4 months recorded in January 2016.

“This past month showed how the market never stands still,” said CREB® president David P. Brown. “The market isn’t expected to be as unpredictable in 2017, but it’s early in the year and there are still lots of unknowns that will shape decision-making for consumers.”

“Every transaction is a personal decision and anyone going through the process of buying and selling real estate will be trying to make the best decision for their family. They need to consider their long-term objectives and think about the price they are willing to accept or pay for a home.”

City-wide benchmark prices totaled $437,400, 0.16 per cent lower than last month and 2.82 per cent lower than last year’s levels. Since recent highs in 2014, residential prices have declined from a low of 4.9 per cent in the detached sector to highs of 11.5 per cent in the apartment condominium market.

Calgary, Jan. 11, 2017 – After a long period of economic downturn, Calgary’s housing market is expected to see some price stability in 2017, but not across all market segments and property types. Both detached and attached prices remain unchanged over 2016 levels, while apartment is forecasted to contract by another two per cent.

“The transition in the housing market will be a slow process,” said CREB® chief economist Ann-Marie Lurie. “We are entering the year with high unemployment rates and the possibility that job growth will not occur until the latter portion of 2017. These conditions will continue to weigh on housing demand, but supply is adjusting to weaker sales activity, which will eventually translate into price stability.”

City-wide sales are forecasted to total 18,335 units in 2017, a three per cent gain over 2016, but 12 per cent below long-term averages. This modest demand change will merge with declining listings and easing inventory in the new home market to support more balanced conditions and prevent further downward pressure on prices.

“This year is about moving away from extremely challenging conditions,” said 2017 CREB® president David P. Brown. “The transition is going to take some time, which means sellers need to stick with the fundamentals of pricing their homes correctly against other comparable product in the market. There’s still lots of choice out there for buyers, but major price declines are unlikely in most segments.”

Alberta’s economy was much softer than many predicted over the past two years, as prolonged weakness in energy weighed on other sectors of the economy, including housing. Since the start of the downturn in late 2014, price adjustments have ranged from a low of nearly five per cent in the detached sector, to a high of 11 per cent in the apartment sector. The amount of price change between these different areas of the market was based on how much oversupply there was in each sector at any given time.

Our housing market is moving toward a new equilibrium, but that shift is heavily dependent on stability in the energy sector and overall labour markets. There is also considerable risk from recent government policy changes that could derail expected gains in the second half of 2017. It’s a new outlook this year, but the market risks shouldn’t be overlooked.

For the entire CREB® forecast, visit creb.com.

December Market Summary

With 2016 officially in the record books, we can at least say it ended on a good note.

Decembers total sales were up 6.14% over last Decembers sales, while the listing inventory was down 13.25%. This decrease in listing inventory, and increase in sales, helped keep the market relatively balanced with a 4.04 absorption rate. The benchmark price in December declined -3.84% which also reflects the years decline of -3.84% in the benchmark price dropping to $440,650.

Interestingly enough the $800,000+ market has continued to out perform last year at this time which is actually helping drive the average price for the year up 2.16% to $479,522. It is interesting to see the benchmark price decline while the average price increased. This suggests that while the lower markets are still seeing some market adjustments; the higher end markets that were hit harder seem to be showing signs of recovery.

November sales slide into old patterns

Coming off a month of stronger sales activity, November’s housing market returned to previous trends. Year-over-year monthly sales totaled 1,227 units, which is nearly three per cent lower than last year and 17 per cent below long-term averages.

“November was the first full month with CMHC’s new lending rules in effect,” said CREB® chief economist Ann-Marie Lurie. “As suspected, the gains in last month’s sales were temporary. Stringent conditions for borrowers are converging with the current economic climate and weighing on demand.”

While supply levels eased in November, the decline in sales resulted in a slight rise in months of supply. This caused benchmark home prices to contract even further. City-wide prices totaled $436,200 in November, a 0.6 per cent decline over the previous month and nearly 4.1 per cent below last year’s levels.

Detached home prices totaled $498,300 in November, making it the first time since early 2014 that the monthly benchmark price dipped below $500,000. Despite this price change, the detached resale sector has still fared better than most of the high density sectors, as it has not faced the same city-wide inventory pressure coming from the new home market.

Year-to-date detached sales have declined by three per cent compared to last year, but have also seen some modest improvements in recent months in the high end of the market, which is likely a byproduct of larger price adjustments.

“These monthly figures aren’t a big surprise given the dynamics of our market right now,” said CREB® president Cliff Stevenson. “We’ve seen pockets of sales activity in certain areas, but also lots of months where the expectations between buyers and sellers just aren’t matching up. November was one of those months.”

“Again, it can’t be overstated how important it is for housing consumers to keep asking questions and drilling down on what’s happening in their specific area,” adds Stevenson. “This kind of exploration and learning is how good real estate decisions get made in any market.”

On October 26/16 CMHC news release. Most Canadian Housing Markets Overvalued, Price Growth to Slow Through 2018: CMHC Reports
OTTAWA, October 26, 2016 — Canada Mortgage and Housing Corporation (CMHC) is finding strong evidence of problematic conditions for Canada overall. Home prices have risen ahead of economic fundamentals such as personal disposable income and population growth, resulting in overvaluation in many Canadian housing markets. However, the combination of overvaluation and overbuilding should help slow the growth in resales and house prices and lead to a moderation in the pace of housing starts.
Toronto and Vancouver were flagged as RED.
Calgary was flagged as YELLOW.
Read the full article on the CMHC web site. More potential problems for Calgary’s already deflated real estate market.

October 17, 2016 is a critical date – changes to mortgage insurance rules were announced by the federal government and will take effect that day. Do you understand the changes and how they will impact your clients and the real estate industry?

Mortgage insurance rules will change to require all insured mortgages to undergo a ‘stress test’ from the lender. That test will require the buyer to qualify for a mortgage at the Bank of Canada posted rate, currently 4.64%, even though they would still receive the contract rate.

The buying power of the client will be lowered by the need to qualify at the higher rate.

Example (as provided by a mortgage professional)

Family A is qualifying for a mortgage using the following information:

Current Annual Family Income $87,000
Household Debt Payments $700 per month
Property Tax Payments $3,000 per month
Down Payment 5%
Mortgage Rate 2.49%

Result:
•Qualifying for a mortgage today, Family A qualifies for a purchase price of $450,000.
•Qualifying for a mortgage after October 17, 2016, given the need to qualify at the Bank of Canada rate of 4.64%, Family A qualifies for a purchase price of $360,000.

Questions

Ask your clients to speak with a mortgage professional about their circumstances. In many cases, the changes will affect their buying power and adjustments may need to be made to their search criteria.

Accepted Offers to Purchase signed before October 17, 2016 will qualify under the current rules provided that the mortgage is funded by March 1, 2017.

Soft demand to impact home prices, CREB® forecasts
by CREB on August 12, 2016

The economic situation in Alberta has impacted all aspects of the economy, including housing demand. However, price declines have been only slightly lower than expectations, as easing amounts of new listings has prevented steeper gains in supply levels, CREB® said today in its 2016 mid-year update.

Benchmark prices have trended down this year and there is no expected change in direction for the remainder of 2016. City-wide annual benchmark prices are expected to contract by 3.8 per cent this year. Since the start of the downturn, monthly prices have declined by nearly five per cent, with the most severe pullbacks in the apartment sector.

“While the market as a whole continues to be challenging for home sellers, the highest price declines are typically in the neighbourhoods and sectors where the largest amount of supply has built up, either from the resale market or the competing new home market,” said CREB® president Cliff Stevenson. “In this kind of market, both buyers and sellers continue to be forced to adjust their expectations. Not all districts and product segments are reacting the same way.”

With no near term changes expected for Alberta’s economy, housing demand will remain soft for the second consecutive year. Overall sales in Calgary are expected to contract by eight per cent this year, following a 26 per cent decline in 2015.

“The scope of this economic downturn has been worse than original estimates,” said CREB® chief economist Ann-Marie Lurie. “Job levels have contracted more than expected, which means we have more people looking for work and more people making the decision to leave the city—not exactly an environment that supports growth in housing demand.”

Layoffs, weak employment prospects and low oil prices are expected to challenge our market for the remainder of 2016. The risk to the housing market lies mainly with additional resale inventory and new home supply.

“There are some roadblocks in this market, but people still need to buy and sell real estate, regardless of the current operating environment,” said Stevenson. “The big thing is making sure consumers are well informed about how the market is reacting in specific segments and within specific communities, so they can make sound decisions. That’s the unique value add of a real estate professional.”

Home prices down, but not out
by CREB on July 04, 2016

Calgary home prices continue to slide in most areas of the market, but not at the rate that many might expect. This is partly due to June’s resiliency in the detached and semi-detached sectors of the market, where sales compared to new listings and standing inventory started returning to more balanced levels.

“The detached market has been gradually moving towards more balanced conditions, helping to prevent price levels from declining at the faster rates we saw in the previous two quarters,” said CREB® chief economist Ann-Marie Lurie. “While this is welcomed news for sellers, it’s very likely that pricing challenges will persist in the housing market until economic conditions start to improve.”

Detached benchmark prices totaled $502,400, which is 0.4 per cent higher than last month, but 3.4 per cent lower than last year’s levels. This is the first time in eight months that detached prices recorded a monthly gain, helping ease the quarterly decline from 2.2 per cent in the first quarter to 0.7 per cent in the second quarter.

Overall sales activity remained relatively weak in June, falling by seven per cent to 2,028 units. Inventory levels went in the other direction and continued to climb in June to 5,973 units, 16 per cent higher than last year. Both the attached and apartment segments of the market have recorded inventory gains around 30 per cent, far greater than the year-over-year increase of five per cent in the detached sector.

Higher inventories and weaker demand continue to have a larger impact on pricing in the apartment and row sectors. June apartment prices slid by another 0.1 per cent over last month, pushing the average year-to-date benchmark price down 5.3 per cent below last year. Attached product experienced a monthly slide of 0.3 per cent, mostly due to steeper price declines in row style product.

“The price adjustments that we’ve seen in the past year have allowed some buyers to get into homes that were previously unattainable,” said CREB® president Cliff Stevenson. “This is especially true for homeowners with financial stability and a good amount of equity in their home. With so much choice out there, it’s giving consumers an opportunity to find their ideal home at a price they can afford.”

CREB June 1st

Housing supply swells in cool spring market

Calgary’s housing inventory was on the rise once again in May as new listings climbed and sales slowed to 1,923 units.

“While recent oil price gains may have some feeling optimistic, weakness in the labour market continues to impact housing demand,” said CREB® chief economist Ann-Marie Lurie. “Job losses are spreading into other sectors, wages are declining and unemployment levels remain high. At the same time, we’re seeing housing supply levels rise in the rental, new home and resale markets.”

Inventory levels rose by 14 per cent in May to a total of 6,148 units. Every product type is experiencing these gains, but the largest inventory growth has occurred in the apartment and attached categories. Together, these sectors represent half of all resale inventories in Calgary.

“The resale apartment market has been the most difficult for sellers,” said CREB® president Cliff Stevenson. “They are competing with improved selection in the lower price ranges of the detached and attached markets, and facing increased competition from the new home sector, where builders are offering incentives to attract potential buyers.”

While apartment resale supply remains 22 per cent below the May high of 2,055 units in 2008, the combination of rising supply in the apartment sector and steep declines in sales activity has elevated months of supply to nearly six months.

The apartment sector of the market has experienced buyers’ conditions for more than 10 months, so the impact on pricing is more dramatic, compared to the detached and attached sectors.

In May, the apartment benchmark price totaled $278,500, a monthly and year-over-year decline of 0.7 and 5.6 per cent. In the detached and attached markets, home prices totaled $500,500 and $332,100, a year-over-year decline of 3.4 and 4.3 per cent.

Market imbalance in Calgary’’’s residential resale housing market continued to weigh on citywide prices in April.

Much like the previous month, year-over-year sales fell while new listings increased, resulting in inventory gains across all sectors of the market.

As a result, benchmark prices in the city declined by 0.4 per cent from last month, and 3.4 per cent from last year, to $441,000.

For sellers, the reality of seven consecutive months of price declines has started to sink in, said CREB® president Cliff Stevenson.

“From re-considering the listing of their home to lowering expectations on price, sellers are beginning to adjust to the current market reality,” he said. “However, some buyers in the market are still not willing to pull the trigger because they expect even bigger discounts. And so that gap between buyers’ and sellers’ expectations still persists across many product types and locations.”

Despite this, the detached sector fared better relative to the other sectors of the market. While detached sales activity has fallen by over four per cent so far in 2016 compared to last year, the sales to new listings ratio improved in April. This prevented sharper inventory gains and caused months of supply to move toward more balanced levels.

The same cannot be said of other market sectors. Year-to-date apartment and attached sales declined by a respective 19 and 13 per cent compared to last year. Slower sales, combined with rising inventories, ensured that market conditions continued to favour buyers in these segments.

“While the weak economic climate is influencing demand, the apartment and attached sectors are further impacted by increased supply in the competing new home sector and rental markets,” said CREB® chief economist Ann-Marie Lurie. “This is one of the contributing factors to the steeper price declines recorded in the apartment sector.”

Since the start of the price declines, monthly unadjusted benchmark apartment prices have declined by 7.6 per cent, while semi, row and detached have declined by a respective 5.9, 4.6 and 4.1 per cent.